Material Variances - Single Material - Standard Actual outputs different

S1 ↞ Pr3

Practice Problem 4

Calculate the Material Variances from the given information.

Particulars Standard Actual
Material quantity per unit (Kgs) 2.00 2.20
Price per kg 14.00 15.00
Actual production or output (in units) 100
Ans:
1
MYV/MSUV
MMV 		− 280
0
MQV/MUV
MPV 		− 280
− 220
MCV − 500

Working Notes

The following data could be picked up from the problem

Standard Actual
SQ SP AQ AP
Material 1 2 14 220 15
Output 1 100

units : _Q in kgs, _P in value/kgs and _O in units

The underlined figures are obtained through the below calculations

AQ = Actual Quantity per unit × Output in units
= 2.2 kgs/unit × 100 units
= 220 kgs

Working Table

Working table incorporating the data in the problem and the calculated values including recalculated standards
Working Table with recalculated standards
Standard Actual
for SO for AO for AI
SQ SP SQ(AO) SC(AO) SQ(AI) SC(AI) AQ AP AC SC(AQ)
Factor 100 110
Material 1 2 14 200 2,800 220 3,080 220 15 3,300 3,080
Total 2 200 2,800 220 3,080 220 3,300 3,080
Output 1
SO 		100
SO(AO) 		110
SO(AI) 		100
AO

Output (_O) is in units, Quantities (_Q) and Losses (_L) are in kgs, Prices (_P) are in monetary value per kg and Costs (_C) are in monetary values.

Standard Output

SO = 1 unit (given)

Actual Output

AO = 100 unit (given)
(AO) =
AO
SO
=
100
1
= 100
(AI) =
AI
SI
=
AQMix
SQMix
=
220
2
= 110
1. SQ(AO) = SQ ×
AO
SO
= SQ × 100

2. SC(AO) = SQ(AO) × SP

3. SO(AO) = AO

4. SQ(AI) = SQ ×
AI
SI
= SQ × 110

5. SC(AI) = SQ(AI) × SP

6. SO(AI) = SO ×
AI
SI

7. SC(AQ) = AQ × SP

Solution

Material Cost Variance

MCV = SC(AO) − AC

= 2,800 − 3,300 = − 500 [Adv]

Material Price Variance

MPV = SC(AQ) − AC

= 3,080 − 3,300 = − 220 [Adv]

Material Quantity/Usage Variance

MQV/MUV = SC(AO) − SC(AQ)

= 2,800 − 3,080 = − 280 [Adv]

Material Mix Variance

MMV = SC(AI) − SC(AQ)

= 3,080 − 3,080 = 0

Material Yield/Sub-Usage Variance

MYV/MSUV = SC(AO) − SC(AI)

= 2,800 − 3,080 = − 280 [Adv]

Solution (alternative presentation)

Material 1
MYV/MSUV

SC(AO)
2,800
−
−
SC(AI)
3,080
+ MMV

SC(AI)
3,080
−
−
SC(AQ)
3,080


− 280


0
MQV/MUV

SC(AO)
2,800
−
−
SC(AQ)
3,080
+ MPV

SC(AQ)
3,080
−
−
AC
3,300


− 280


− 220
MCV

SC(AO)
2,800
−
−
AC
3,300


− 500

Verification

If adopting the first and second presentation methods, it would help building the following table to enable us to verify whether our workings are correct or not.

Verification

Formula Material 1
MYV/MSUV
+ MMV 		SC(AO) − SC(AI)
SC(AI) − SC(AQ) 		− 280
0
MQV/MUV
+ MPV 		SC(AO) − SC(AQ)
SC(AQ) − AC 		− 280
− 220
MCV SC(AO) − AC − 500

Simplest

One may use this as the simplest presentation of calculations, since all the amounts used in the formula are present in the working table.

If it is for verification purposes, we may avoid the formula column.

Please adopt a presentation based on the examination you are attending, the proportion of marks allotted and time available to/for the problem.

Author : The Edifier
S1 ↠ Pr5